Business World

Wednesday 24 January 2018

Government bonds rise, euro falls after Merkel comments on eurozone crisis

Herbert Lash

GOVERNMENT bond prices rose on Wednesday over fears of slow economic growth while the euro fell broadly after comments by German Chancellor Angela Merkel reignited worries about the eurozone debt crisis.

U.S. and European stocks rose, however, helped by solid corporate results, and Brent crude gained for a sixth session, with bloodshed in Syria highlighting potential supply issues that overshadowed worries about the global economy.

U.S. Treasury debt prices rose as investors turned defensive on persistent economic worries and financial contagion from the euro zone, which pushed bond yields toward historic lows.

The euro stumbled to its lowest in 3-1/2 years against the British pound, extending broad losses. Merkel was quoted in a media report as saying, "We have not yet shaped the European project so that we can be sure that everything will turn out well, we still have work to do," she said, adding she was optimistic about success.

"It's all about Merkel comments. She's kind of putting pressure on the other government leaders to sort of move in the direction of the leaders' meeting," said Vassili Serebriakov, senior currency strategist at Wells Fargo in New York.

The sale of 4.17 billion euro of zero coupon two-year German bonds drew the strongest demand since a January, as investors paid Berlin to park cash in its two-year debt at auction for the first time ever.

Ten-year Bund yields were 3 basis points down at 1.2pc not far from a record low of 1.13pc hit in January.

The benchmark 10-year U.S. Treasury note was up 7/32 in price to yield 1.4841pc.

A rebound in tech stocks lifted Wall Street. Intel late Tuesday cut its full-year revenue outlook, the latest tech company to warn about slowing demand, but the shares rebounded 2.5 percent to $26 in early trading and lifted technology shares 0.7 percent.

"We're relatively stable today with a relief rally in Intel since people were worried the results would be much worse than what was delivered," said Clark Yingst, chief market analyst at Joseph Gunnar & Co in New York.

The Dow Jones industrial average was up 41.33 points, or 0.32pc, at 12,846.87. The Standard & Poor's 500 Index was up 5.91 points, or 0.43pc, at 1,369.58.

The Nasdaq Composite Index was up 23.76 points, or 0.82 percent, at 2,933.80.

The pan-European FTSEurofirst 300 index was up 1pc at 1051.80 points, well within a 2.5pc trading range of the past week.


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